Queensland’s proposed tree laws are the very worst kind of red tape


Today I have a piece in Queensland Country Life arguing the new proposed vegetation clearing laws in Queensland will halt economic growth, suppress entrepreneurship, and damage our international competitiveness.

The strict changes will also reverse the onus of proof, retrospectively enforce the laws back to 17 March 2016, and remove exemptions for clearing high value agricultural land.

This is the latest in a series of contentious political games between the left and right of politics, with farmers and land owners sitting in between:

Jointly understanding that clearing is necessary for growth, and that farmers have the incentive to protect and cultivate their own land, meant very few clearing controls prior to the 1990s.

However, as the 1990s came so too did the growth and spread of conservation campaigns. Legislation changes in 1999 and 2004 largely phased out broadscale land clearing by the end of 2006.

Thankfully, in 2013 the then Newman government relaxed the clearing laws. But now the Labor government, following through on an election promise, will take us back to the 2006-2013 era when almost no broadscale clearing occurred:

Of course the environment must be protected and conserved. But what happened to the importance of economic growth and development?

Effective agricultural regulation draws a reasonable line between environmental protection and agricultural production.

It is undeniable that efficient agricultural production requires the felling of trees. By entirely preventing such clearing—even for high value productivity land—policy makers have clearly lost sight of the real purpose of regulation.

The proposed bill has been referred to a state parliamentary committee, which is due to report in June this year.


Uber now illegal in Victoria


Today in Melbourne, a court deemed Uber driver Nathan Brenner guilty of driving a hire car without a commercial licence or registration (reported in The Age).

Put simply, Uber has now been clarified as illegal.

Just when we thought the ridesharing momentum was shifting – ACT legalised the service one month ago – Victoria has taken a further step backwards.

This year-long test case sends a strong signal against the growing ridesharing tech giant. There are 11 other drivers facing similar charges. But the real losers here are the Victorian economy and the rights of Australian producers and consumers. As I wrote in the West Australian earlier this year:

Australians should be appalled at this latest government intrusion on exchange. Acceptance of an Uber ride is a voluntary exchange. As with any other free market transaction, both parties understand the risks and agree to the conditions. To require permission to willingly trade private property flies in the face of a free society.

Although the court is simply interpreting the law, these rules are outdated and desperately in need of change. The Victorian government needs to get out of the way of this potential economic revolution.


Codeine changes will only make pain more painful


Darcy Allen is a Research Fellow at the Institute of Public Affairs and Jason Potts is an Adjunct Fellow at the Institute of Public Affairs.

Imposing mandatory prescriptions for drugs containing codeine will line the pockets of medical professionals at the cost of taxpayers.

Recently the National Drug and Alcohol Research Centre at the University of NSW released research showing codeine-related deaths increased from 3.5 to 8.7 per million of the population from 2000 to 2009.

That sounds very bad, but almost all of these approximately 150 deaths per year involved ‘multiple drug toxicity’. That is, codeine was one of several drugs involved. So it’s not actually even obvious that codeine is the problem here.

Nevertheless, the Therapeutic Goods Administration (TGA) maintains codeine is an addictive ‘drug of abuse’ in desperate need of regulatory attention. Their recent interim decision means all over-the-counter medicines containing codeine be changed to prescription-only as early as mid-2016.

One of the quickest ways to effectively assess calls for new regulations is to follow the money. So, who wins and who loses from making codeine prescription-only?

Doctors win. Forcing more patients to queue at the door for basic prescriptions means more money in the pockets of GPs. A Macquarie University study finds up-scheduling analgesics will directly cost consumers an additional $70 million, and cost the PBS an additional $170 million. That money flows to doctors.

Consumers and pharmacies lose. If such a proposal goes ahead this means hundreds of popular painkillers — including Panadeine Forte, Nurofen Plus and Codral Cold and Flu — will become more expensive and inconvenient for everyday Australians. Pain will become a lot more painful.

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ACT’s new Uber rules a step in the right direction


Last week, the ACT became the first jurisdiction to announce ride-sharing legislation (as reported here, here and here). Companies such as Uber will face these new rules in two stages:

The first, to start from October 30, requires ride-share drivers to be accredited and registered, with criminal and driving history checks, and have safety checks done on their cars.

Drivers must be alcohol and drug free. Booking services have to have customer complaint mechanisms and surge pricing will be banned during emergencies.

A second stage of regulation, starting after legislation is passed, will require ride-share drivers to have compulsory third party and property insurance.

This is a step in the right direction for the future of ride-sharing, these rules are on the more reasonable end of realistic legislation. But I remain cautiously optimistic.

My apprehension stems mainly from new forms of licensing more broadly. Ride-sharing drivers in the ACT will now pay $150 per year in license and accreditation fees (plus other costs for various checks).

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Mercatus research shows link between regulations and budgets

New research, by the RegData team at the Mercatus Center in the US, sheds light on the strong correlation between ‘government agency budgets’ and ‘regulatory restrictions’.

Mercatus has graphed the number of ‘restrictions’ – defined as the number of restrictive clauses in regulations (such as ‘prohibited’, ‘must not’, ‘shall’) – against government agency budgets producing those regulations. The strong correlation below is both unfortunate and unsurprising:

Mercatus Graph 1

Patrick McLaughlin and Oliver Sherouse describe their graph as follows:

These two lines – total agency restrictions and total agency budgets – move in the same direction. In fact, over the period for which we have data (from 1975 to 2014), the simple correlation between total of all regulatory restrictions and total of all agency budgets equals 0.91. (A correlation of 1 would indicate a perfect match.)

The scatterplot reveals more of the detail via agency through time:

Mercatus Graph 2

It seems the Environmental Protection Agency (EPA) is the clear winner, followed closely by the Occupational Safety and Hazard Administration (OSHA) and the Federal Communications Commission (FCC).

Note that while the data above shows a correlation, it doesn’t quite answer a number of other questions about causation:

While the correlation between agency budgets and the levels of agency restrictions is clearly high, the question of whether one causes the other remains unanswered. If budgets are increased, does regulatory output correspondingly increase? Do budgets change in response to changes in regulatory output? Or is a third factor—such as new legislation directing agencies to regulate or deregulate—the driving force?

This means the safest bet is probably just to stop doing both.


An essential distinction between ‘good’ and ‘bad’ innovation policy


Entrepreneurship and innovation have reclaimed their rightful place at the centre of political debate.

But while Turnbull is being praised as the ‘innovation PM’ we must be especially cautious of unaccountable and wasteful public spending cloaked under the banner of ‘innovation’ (after all, it seems especially difficult to fight against innovation.).

There is a fundamental distinction between ‘good’ and ‘bad’ innovation policy. On one hand, good policy is governments being adaptable and flexible to innovation and understanding that ‘disruption is our friend‘. This rhetoric is important – it is the reason Turnbull is sitting favourably with the tech crowd.

On the other hand, bad policy is where governments use terms such as ‘innovation’, ‘start-ups’ and ‘tech entrepreneurs’ as a political shield for spending money on their favourite things. The tendency to spend lies at the heart of Labor’s most recent plans in this area:

Mr Shorten said that 2000 university graduates would be given an “honours year” at university accelerator hubs to develop their business ideas, supported by income-contingent loans as well as business training and mentorships.

As well, 2000 overseas students would receive one-year graduate entrepreneur visas enabling them to extend their stay in Australia. “Having gone to the effort of helping educate these bright people, we want to encourage some of them to stay in Australia and back in their idea.”

This policy is tantamount to arguing the government should get into the venture capital business – a ludicrous suggestion. If the government has any place in innovation policy it is in setting a favourable institutional environment. The task of the onlooking policy analyst is in separating out these two vastly different types of policy (all of which look good on the surface).

The IPA’s Chris Berg recently described the tendency for innovation policy boondoggles on The Drum:

Innovation policy can easily become as much a boondoggle as any Alice to Darwin railway. State governments have been burning money on wasteful “innovation” policies for decades. Every new premier wants their capital to become Silicon Valley. But who now remembers ComTechPort?

We actually know very little about why economies innovate, let alone how we might encourage them to innovate more.

Berg is entirely correct – it is precisely because we don’t know where innovation comes from that the job of the government is to get out of the way. I touched on this counterproductive government interference late last week on my blog:

Innovation policy is too often captivated by doing things, rather than not doing things. We can only hope that Turnbull does not create an innovation policy full of subsidies (like most before him have.).

The role of the state in is setting a stable, broad, and consistent set of underlying laws.

Real innovation policy is about limited government and economic freedom: property rights, lower taxes, and a strong rule of law.

As the IPA’s Mikayla Novak wrote last week, Australia has dropped in the Fraser Institute Economic Freedom of the World Index. If both the government and opposition turn attention to lifting our economic freedom innovation will flow naturally from its source: the entrepreneur.


What taxi strikes teach us about economic growth


Next week, Victorian taxi drivers will strike in a futile protest against their likely demise due to the rapid uptake of the revolutionary ridesharing company Uber.

Maybe they should have checked out the similar taxi strike in the United Kingdom last year that increased Uber signups by 850 per cent.

But what this messy innovation process reveals is the engine of economic growth: creative destruction.

Entrepreneurship is about replacing the old with the new. And in the process innovation makes our economy more productive, our people more prosperous, and our lives more free.

But as new industries replace the old, it is inevitable that someone somewhere will be hurt.

The hurt is often felt by well established, visible, and cashed-up constituencies. Fearing their imminent loss, they begin (or continue) rent seeking — striking, lobbying, protesting.

Unfortunately, while this process is predictable, governments too often use a ‘precautionary principle‘ and side with the lobbyists. The IPA’s Jason Potts and I argued precisely this in a submission to the Productivity Commission inquiry into set-up, transfer and closure:

Precautionary regulation leads to slowing business entry and exit. Fewer businesses enter the market for fear of being regulated against; while incumbents sit idle behind barriers of regulations … this precautionary principle may continually creep into public policy.

When incumbents fear they may be out-competed on the market, their lobbying efforts begin. Their demands – largely based around hypothetical harms, or maintaining the status quo – generate more political pull than the potential benefits of small new business entries.

Just because there is friction does not mean quelling the tensions is good public policy. I pointed this out in The West Australian recently:

Unfortunately the transition from old rules to new rules will not be a frictionless. Traditional industries will continue to put up a fight. We are seeing this in real time with the Taxi Services Commission. And while these industries – which will be inevitably be destroyed – have every incentive to pay to protect their artificially high prices this does not make good policy.

If the Victorian government understands what economic growth is and how it comes about, they would do best to ignore the current taxi strikes and deregulate the industry.

You can read Darcy Allen and Chris Berg’s report, The sharing economy: how over-regulation could destroy an economic revolution, here. You can also read Darcy Allen’s OECD Insights piece on regulation design principles around the sharing economy, What is a taxi? Regulation and the sharing economy, here.


Heritage protection for commission housing?


The Sirius apartment complex has been called a ‘brutalist eyesore’, but the Heritage Council is seeking to have it listed by the State Heritage Register


That’s it – Australia is now officially heritage crazy.

In Sydney, the Heritage Council is eyeing off an old and precious building: a 1978 public housing monstrosity. A heritage system designed to protect the magnificent buildings of yesteryear now includes 1970s commission housing blocks.

Only last week, a similar story appeared in the UK Evening Standard. A 1998 British library – denounced as ‘one of the ugliest buildings in the world’ when built – is now protected under Grade I listed status.

Any logical consistency of heritage listings seems to have been thrown out the window. Although the line between ‘to heritage list’ or ‘not to heritage list’ remains blurry, we are certainly travelling in the wrong direction. It seems almost any claim for protection will be awarded.

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A level playing field for the sharing economy


As reported in the Herald Sun yesterday, the $25 billion accommodation-sharing company Airbnb has come under attack from Tourism Accommodation Australia (TAA).

In a series of submissions, the TAA has called for a national system of registration out of concerns for the safety of guests, a future shortfall of tourism investment, and the payment of taxes.

The first and second concerns have little justification – safety and investment are solved by the market. As I argued in OECD Insights last December:

The solution is to encourage alternative approaches such as professional certification to signify quality. Certification does not legally prevent individuals from providing certain services; it allows the market to decide. The benefit is that private parties determine whether the benefits of the certification outweigh the additional costs of providing the good.

We must encourage the sharing economy to create, test and refine their own certification bodies. For example, AirtaskerPRO is an additional screening process including an ID check and an in-person interview to obtain a badge on the user profile. These need to be embraced.

The third concern, however, is where policy makers should focus. It is crucial that Australian legislation is equally and consistently enforced.

Much debate surrounds whether or not we should have a ‘level playing field’. The answer to this important question is a resounding ‘yes’.

We currently have two different playing fields – one set of rules for the incumbent hotels, and one for Airbnb. To get both on the same field, incumbents push policy makers to enforce the already existing rules onto the new entrants.

This is often the less politically treacherous path, but it makes little economic sense. This path leads to companies such as Airbnb being integrated into a highly regulated and heavily taxed environment.

This is not the set of rules we want companies to play by.

The important question is where we want the playing field to be.

Governments must create a new playing field – one with low taxes, a low regulatory burden, and a greater reliance on the technologies which have allowed these industries to emerge.

Deregulating the existing hotel industry will provide the level playing field we desire – it will just be at a different height.

You can read Darcy Allen and Chris Berg’s report, The Sharing Economy: How Over-Regulation Could Destroy an Economic Revolution, here.


Airbnb under fire from regulators


Regulators are once again scrambling for a hold on the elusive sharing economy. This time the worrying precedent comes from Santa Monica, California. New rules passed by city council require short-term rentals (including Airbnb hosts) to stay in the unit with their guests, register as a business, and pay a 14 per cent hotel tax.

Luckily, the city has created some jobs in the process. Three enforcement officers and an analyst – at a cost of $410,000 in the first year alone – will sniff out potential violations. If successful, around 1,400 Airbnb properties in the Santa Monica area will be effectively shut down.

Airbnb works because properties are decentralised and operate in private homes spread about the city. Individual hosts list properties (apartments, mansions, castles) and consumers may browse and book online. For guests, this means more individually tailored accommodation, a cheaper service, and a more personal experience. For hosts, this means cutting out the regulatory burden.

For regulators, however, this makes detection and enforcement a tricky puzzle. To skirt this problem, the new rules request information from Airbnb, including private details about hosts and their properties. Only then may regulators sift through in search of potential zoning code violations.

Squeezing individuals into hotel-like rules misunderstands why Airbnb exists, and the low profit margins on which hosts rely. Around 80 per cent of Airbnb properties are in violation of the new rules, with many of these individuals using the income to pay their mortgages.

These tax and operation requirements will only serve to destroy one of the largest private tech companies. These rules are a roadblock in the potential economic revolution the broader sharing economy – including the wildly popular Uber – may bring.


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